There is no stress in 85 per cent of REC loan book: PV Ramesh

PV Ramesh, CMD, REC, says 85% of REC loans go to the public sector, distribution, generation and transmission of the government power utilities -- both central and state -- and there is no stress here.

Edited excerpts:

Rural electrification has been a cornerstone of the current government’s plan. We were just chatting with the power secretary before the break. Every village in the country is now electrified. However, rural India is still without power. What is the roadmap and plan and the next leg of taking electricity to every household?

This has been a proud moment for us. As the honourable prime minister has declared on 28th April, every single village in this country has been provided with access to power. That is every single village listed in the census of 2011, nearly about 6 lakh villages. We crossed a milestone.

It is a significant move in terms of pushing the last mile to reaching out to the hitherto excluded areas in the villages and this is a big step forward in inclusive development in creating a new India.

The next big step is the programme that the honourable prime minister launched last year in October 2017 -- the Pradhan Mantri Sahaj Bijli Har Ghar Yojana, the Saubhagya Scheme -- which seeks to take electricity to every single household in this country. That is nearly 3.8-crore households and that is a programme that is being launched and is at brisk pace of execution across the country.

The power ministry has estimated that connecting all homes with power connections will require 28 GW of generation capacity. What is the role REC would play over the next two to three years? How much of finance does REC target to generate for the sector?

REC is very active in financing the renewable segment. We are the first Indian corporate to raise green bonds and then create a special window for financing renewable projects and we are at the forefront of promoting green energy in this country.

However, we will continue to support hydro and thermal segments as well. We have just financed a hydro project in Andhra Pradesh in Polavaram. We will continue to support this modernisation of the existing thermal projects as they get retro fitted. As demand picks up, we are looking forward to a very promising growth in the REC’s investment in the generation segment.

Power plants are underutilised with issues like fuel shortage and the power sector is under stress. When do you see resolution of stress in the sector coming?

The government is pushing towards a power for all within the shortest possible time to ensure affordable quality power to all citizens of this country.

REC in that sense has an extremely unique place because we are a major financing company that provides much needed funding for the power sector across the country and across the value chain – generation, transmission, distribution and also the upstream activities like coal mine development, downstream activities like manufacturing of the electrical appliances, renewable energy.

We are also involved as a nodal agency in major flagship programmes like Deen Dayal Upadhyaya Gram Jyoti Yojana, Saubhagya and power for all and such other programmes. We have an unique place of working with the private sector, public sector, state utilities, state governments in terms of ensuring that the quality power that the power sector transforms in a way that the country can accelerate on the development path.

Axis Bank saw huge stress from power sector. Investors are concerned. How much exposure do you have to the government and private sector and which segment -- generation, transmission, distribution -- are you seeing stress in?

There are power projects which are experiencing stress and particularly in the IPP segment and also in the thermal power segment. There are a few hydro projects, but essentially REC has the unique position of having its loan book of nearly Rs 240,000 crore. Of that, 85% goes to the government sector, distribution, generation, transmission of the government power utilities -- both central and state utilities -- and there is no stress in any one of those 85%.

Of the remaining 15%, about 12-12.5% goes to the private IPPs and particularly to the generation segment. We have the lowest non-performing assets among the peers in this league. Our gross NPAs at the end of third quarter of the last financial was 2.9% and the net was 2.1%. We are operating within the framework defined by the Reserve Bank of India and we are working with all the other banks.

Do you see a rise in gross NPAs and provisions due to the stress?

It is not the right time to talk about the specifics because the audit is still ongoing. We will certainly comply with all the provisioning requirements that the RBI mandates. We will ensure compliance with the highest standards of corporate governance and ensure that the assets are supported as per norms.

I am fairly confident that the situation is stable, there is an optimistic future. As a major player in the power sector and not just as a financier but as a holistic total service provider, I am very confident that the power sector is going through a transformational change.

The next few months and years to come is very, very positive. Our shareholders and citizens at large ought to be believed and know that what is happening on the power sector front.

How is the performance under the UDAY scheme so far and which discoms were under stress and which according to you are performing better?

The UDAY scheme has been very closely monitored at the highest levels of the government. The Ministry of Power monitors this very closely. We play a supportive role to the ministry in this regard and we see a significant impact of UDAY.

UDAY has reduced the debt servicing burden of the discoms collectively by about Rs 15000 crore a year. It has created that level of additional financing space for the discoms to invest in capital strengthening. And when we look at the various operational parameters, almost all the discoms are making sincere efforts to see their operational efficiency improves, we see at an aggregate level and AT&C losses are coming down, the cost of ACS - ARR Gap is coming down, the billing efficiency is improving, the collection efficiency is improving and the overall management of in terms of all the discoms have filed tariff petitions before the regulators.

So, we see this big transformational impact of UDAY across the country.